of citizens that had the American Dream. He wanted to increase the percentage of home
ownership. Around the world and here in the United States if you have the need to buy, sell,
Manufacture, finance or invest you have been affected by President Clinton??™s influence. I am
going to explore the main reason that caused the greatest financial collapse since the great
depression of the 1930s. I will explain some of the many effects of attempting to make
American home ownership more affordable.
mortgage industry. They set the guidelines for what it took to get a mortgage in America.
FHA also would facilitate the purchase of mortgages on the secondary market that fit their
Guidelines. This allowed mortgage brokers and mortgage wholesalers to go out and originate
loans that fit the FHA guidelines. These loans were then sold in the secondary market. The
two biggest investors on the secondary market are Freddie Mac and Fannie Mea. Both of
these agencies are backed by the country??™s government. With the government backing these
agencies they were very attractive investment for investors from around the world.
In order to increase home ownership the guidelines would have to be expanded to
include more Americans. The ???decision makers??™ set forth to expand the guidelines.
Mortgage brokers partnered with bankers and Wall Street investors. This partnership
yielded an avenue to broaden the guidelines to originate mortgages the rest of the country
followed suit. The mortgages were sold to Wall Street investors. The Wall Street investor
would then bundle the mortgages to be sold on the world??™s open market, as mortgage back
securities. Around the world, investors, mutual fund managers and finical opportunists
consumed these mortgage backed securities. Money was being made, more Americans
The development of creative financing and the subprime market accelerated the ability
for more Americans to get mortgages. In the anticipation that home values would continue to
raise, Adjustable Rate Mortgages (ARM) and teaser rate loans became the norm. The theory
was that the home owner would build equity and refinance in to a more stable safer mortgage
before the teaser rate was over or the ARM began to adjust. As a consequence supply became
short but demand continued to grow and price continued to rise. This created a ???bubble??™ that
grow in to housing market.
adjust. This caused many home owners not to be able to make their payments. Explore more about big bath accounting at businessays.net.
houses had peaked, and as a consequence home owners were unable to make their new
payments. Because loan to value ratios (LTV), they could not refinance their mortgages into a
more stable, safer mortgages. The amounts of foreclosures begin to rise. Mortgage guidelines
begin to stiffen, subprime mortgages went away and created financing stopped. As a result
more and more nonperforming assets (foreclosures) on their books.
This brings us to the effect of the mortgage meltdown. The media highlighted
banks, depositors wanted their money. Because the Banks were unable to give depositors
their money they began to collapse. This caused some banks taking over by the Federal Deposit
Insurance Corporation (FDIC). The real estate market continued to be flooded with
foreclosures. This decreased the value of the houses. causing a ???ripple??™ effect throughout the
final effects that the real state crisis on global economy is yet to be determine.
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